In unpaid loan debts, broken ties between lender and builder

Published: Sunday, September 1, 2013 at 1:00 a.m.

Last Modified: Saturday, August 31, 2013 at 7:41 p.m.

SARASOTA - In both banking and real estate, success often means being chummy with your clients and your lenders.

So it should come as little surprise that Bank of Commerce chief executive Charlie Murphy had a “friendly” working relationship with developer and investor Bill Griffin.

The pair of Sarasota business veterans cemented their ties over rounds of golf at the private Gator Creek Golf Club, where Griffin — one of the bank's most sizable borrowers and the former head of defunct insurer Riscorp Inc. — was an equity member.

But after Griffin failed to repay $3.75 million in loans in January 2009, their relationship soured. These days, Murphy downplays their onetime rapport.

“I knew Bill, and we had done business in the past,” Murphy said. “I would say it was a friendly relationship, but I wouldn't describe Bill as a friend.”

With a judgment now swelled to $5.7 million, the bank is attempting to seize and sell Griffin's corporate interests and personal belongings — including the Gator Creek membership — to cover the debt.

It also alleges that Griffin, a successful entrepreneur who served time in prison for orchestrating illegal campaign contributions and whose Bank of Commerce debts comprise a large portion of the lender's red ink, has been trying to shield assets to avoid paying back his debts.

For Bank of Commerce, the stakes are high. It needs all the capital it can muster.

The bank is Southwest Florida's only under-capitalized financial institution — at a time when most banks have recovered from the woes of the Great Recession and financial meltdown.

In a troubling sign, Bank of Commerce's capital cushion has dwindled from $7.4 million at the end of 2012 to $4.5 million as of June 30. Murphy attributes the drop to declines in the value of the bank's securities portfolio.

The decrease does not flow through to Bank of Commerce's income statements, and the value can vary widely depending on the movements in the bond markets, Murphy said, noting that the bank's Tier 1 capital ratio has improved in the past 18 months.

But Bank of Commerce also remains under a two-year-old regulators' enforcement order to raise capital levels, in part because its nearly $24 million in nonperforming assets also gives it one of the higher ratios of nonperformers-to-assets in the state.

Griffin, for his part, contends he now works two jobs — at one, he tried to make money from investments. The other involves defending his family's enterprise from Bank of Commerce.

“That's all I focus on,” he said during a deposition he gave for the case in March.

If this is so, then Griffin has been working overtime of late, according to court documents.

The bank has asked a judge to appoint a receiver to investigate the financial dealings of Griffin, his children and their business interests.

Attorney Steven Chase, who took over the bank's case several months ago, also wants Griffin held in indirect contempt for spending on a “lavish life-style” rather than repaying the bank.

But Griffin has fought back.

When the bank wanted to enter and search some of his Sarasota properties, Griffin refused to let investigators in. He termed the search “harassing” and “an invasion of privacy,” according to court filings.

Griffin's attorneys declined to comment for this article.

Though the $3.75 million loans remains at issue, court records show Griffin's borrowing from Bank of Commerce was extensive.

In 2006, for instance, a Griffin company borrowed money from the bank to build a shopping center in North Port.

Construction never occurred, though, and five years after the loan was cut, Bank of Commerce won an $8.4 million judgment and took over the 26-acre site.

Around the same time the North Port loan was made, the bank issued separate loans, of $1.25 million and $2.5 million, to companies controlled by Griffin.

He and his wife, Carla, guaranteed their repayment, records show.

Though the loans were extended several times, the combined $3.75 million in debt ultimately slipped into default in early 2009. In response, the bank sued.

The case dragged on for more than a year. Griffin at one point accused the bank of failing to act in “good faith and fair dealing,” but Circuit Judge Charles Roberts denied that claim.

A judgment for $4.4 million was issued against Carla Griffin in April 2010. But by then, she and Bill Griffin were no longer together: She had filed for divorce in early 2008. Three years later, she died.

In October 2010, Judge Roberts ruled for the bank and ordered Griffin to repay $4.9 million with interest and fees.

Griffin is not the only borrower Bank of Commerce has gone after recently. Not long ago, it won a nearly $7.1 million foreclosure judgment against Coastal Island Group LLC, a local firm comprising Daniel Ball, Guy W. Peterson and W. Howard Rooks, records show.

Lots that secured the loan are to be sold at auction by the Sarasota County Clerk of Court on Sept. 4.

Though the scraps between the once-effusive lender and the once-prolific investor offer a rare public show of business brutality, some are not surprised to see Griffin attached to the imbroglio.

Many consider Griffin to be among the most notorious figures in Florida insurance history.

After successfully launching workers' compensation firm Riscorp Inc. and guiding it through years of phenomenal growth, Griffin in 1996 took the company public through a stock sale and pocketed more than $60 million in bonuses in the process.

But the company's fortunes turned less than a year later, when Riscorp became the second-largest insurance concern to collapse in state history.

In the wake of the corporate implosion, five Riscorp officers — including Griffin — were indicted for allegedly funneling more than $360,000 in illegal campaign contributions to politicians, including Sarasota's Katherine Harris, then a state senator. Harris paid back $20,000 that her state senate campaign had received.

Griffin, who was reportedly worth $500 million at the time, pleaded guilty to a felony charge of conspiracy and served a five-month sentence in a Panhandle prison camp.

In the years since, Griffin's business acumen appears to have lost some of the sparkle that initially made Riscorp seem a wunderkind, according to court records.

Wells Fargo Bank won an $11.1 million foreclosure judgment against him tied to buildings he controlled in Southside Village, including the Morton's Plaza complex on Osprey Avenue.

Aurora Loan Services obtained a $2.7 million judgment over a loan secured by 4312 Higel Ave., on Siesta Key.

U.S. Bank won a $2.5 million foreclosure on a condo at The Beach Residences, on Lido Key.

In filings in Bank of Commerce's lawsuit, the lender claims Griffin has converted a number of his corporate entities into limited liability companies and given his children partial ownership to shield them from the bank.

The banks also contends Griffin sold a Lakewood Ranch office building for $2.15 million and deposited most of the sales proceeds in a secret Cayman Islands bank account to prevent the bank from seizing it.

The bank also has laid claim to $539,000 Griffin received from Greenstreet Inc., a successor entity to Riscorp. The money was recorded as a loan, but the bank maintains it was instead a capital distribution that should be available for recovery.

Griffin used that money to “fund his lavish lifestyle, paying his personal American Express bills, his housekeeper, his cable bills and an assortment of other, non-business expenses,” the bank said in court documents.

Kimberly Bald, Griffin's attorney, has yet to file responses in court to the bank's requests for a receiver to take control of his business assets, or to the motion for contempt, records show.

If the adage that one has to “spend money to make money is true,” it could apply to Bank of Commerce collections, as well.

Murphy said he does not know how much money the bank has spent trying to collect from Griffin. But in April, he told shareholders the bank's attorneys are “diligently pursuing borrowers to recoup money.”

Murphy said that those professional fees have affected bank profits.

The bank has lost $229,000 through the first half of 2013.

Murphy maintains the cost has not only been kept low, but that it will work out to a fraction of the collection overall.

“I have a responsibility to value that cost versus what I would think to be the end recovery,” Murphy said.

“The last downturn caused a lot of people to have problems that we ended up having to pursue through foreclosure and litigation,” he said.

Unwittingly, perhaps, Griffin has caused the bank to rack up larger fees than it might have, after the bank was forced to switch lawyers earlier this year.

Sarasota attorney Thomas Dart had been handling the case for the bank. But when his firm, Adams and Reese, merged in March with a Jacksonville law firm that had represented Griffin and related companies six years earlier, then-Circuit Judge Rick DeFuria ruled that a conflict of interest existed.

Adams and Reese could no longer represent the bank in the case, leading the bank to hire Chase, an attorney with Shumaker, Loop & Kendrick.

But Griffin also had to change attorneys last fall, when Harry Haskins and Thomas Avrutis stepped away after both were subpoenaed by the bank to explain their payments from Griffin. That created “a conflict and irreconcilable differences,” they said.

Neither Chase nor Murphy would comment on how much of Griffin's debt has been recovered to date.

Given the animosity, there is little surprise that there are no ongoing talks to settle, Chase said.

“I've always welcomed business solutions to business problems,” the attorney said. “There are no current discussions to settle, but that doesn't preclude discussions from occurring in the future.”

<p><em>SARASOTA</em> - In both banking and real estate, success often means being chummy with your clients and your lenders.</p><p>So it should come as little surprise that Bank of Commerce chief executive Charlie Murphy had a “friendly” working relationship with developer and investor Bill Griffin.</p><p>The pair of Sarasota business veterans cemented their ties over rounds of golf at the private Gator Creek Golf Club, where Griffin — one of the bank's most sizable borrowers and the former head of defunct insurer Riscorp Inc. — was an equity member.</p><p>But after Griffin failed to repay $3.75 million in loans in January 2009, their relationship soured. These days, Murphy downplays their onetime rapport.</p><p>“I knew Bill, and we had done business in the past,” Murphy said. “I would say it was a friendly relationship, but I wouldn't describe Bill as a friend.”</p><p>Griffin's default generated ripples that continue to this day.</p><p>Lately, their legal fight has turned nasty, court records reveal, with allegations of secret offshore accounts and financial shenanigans.</p><p>With a judgment now swelled to $5.7 million, the bank is attempting to seize and sell Griffin's corporate interests and personal belongings — including the Gator Creek membership — to cover the debt.</p><p>It also alleges that Griffin, a successful entrepreneur who served time in prison for orchestrating illegal campaign contributions and whose Bank of Commerce debts comprise a large portion of the lender's red ink, has been trying to shield assets to avoid paying back his debts.</p><p>For Bank of Commerce, the stakes are high. It needs all the capital it can muster. </p><p>The bank is Southwest Florida's only under-capitalized financial institution — at a time when most banks have recovered from the woes of the Great Recession and financial meltdown.</p><p>In a troubling sign, Bank of Commerce's capital cushion has dwindled from $7.4 million at the end of 2012 to $4.5 million as of June 30. Murphy attributes the drop to declines in the value of the bank's securities portfolio.</p><p>The decrease does not flow through to Bank of Commerce's income statements, and the value can vary widely depending on the movements in the bond markets, Murphy said, noting that the bank's Tier 1 capital ratio has improved in the past 18 months.</p><p>But Bank of Commerce also remains under a two-year-old regulators' enforcement order to raise capital levels, in part because its nearly $24 million in nonperforming assets also gives it one of the higher ratios of nonperformers-to-assets in the state.</p><p>Griffin, for his part, contends he now works two jobs — at one, he tried to make money from investments. The other involves defending his family's enterprise from Bank of Commerce.</p><p>“That's all I focus on,” he said during a deposition he gave for the case in March.</p><p>If this is so, then Griffin has been working overtime of late, according to court documents.</p><p>The bank has asked a judge to appoint a receiver to investigate the financial dealings of Griffin, his children and their business interests.</p><p>Attorney Steven Chase, who took over the bank's case several months ago, also wants Griffin held in indirect contempt for spending on a “lavish life-style” rather than repaying the bank.</p><p>But Griffin has fought back.</p><p>When the bank wanted to enter and search some of his Sarasota properties, Griffin refused to let investigators in. He termed the search “harassing” and “an invasion of privacy,” according to court filings.</p><p>Griffin's attorneys declined to comment for this article.</p><p>Though the $3.75 million loans remains at issue, court records show Griffin's borrowing from Bank of Commerce was extensive.</p><p>In 2006, for instance, a Griffin company borrowed money from the bank to build a shopping center in North Port.</p><p>Construction never occurred, though, and five years after the loan was cut, Bank of Commerce won an $8.4 million judgment and took over the 26-acre site.</p><p>Around the same time the North Port loan was made, the bank issued separate loans, of $1.25 million and $2.5 million, to companies controlled by Griffin.</p><p>He and his wife, Carla, guaranteed their repayment, records show.</p><p>Though the loans were extended several times, the combined $3.75 million in debt ultimately slipped into default in early 2009. In response, the bank sued.</p><p>The case dragged on for more than a year. Griffin at one point accused the bank of failing to act in “good faith and fair dealing,” but Circuit Judge Charles Roberts denied that claim.</p><p>A judgment for $4.4 million was issued against Carla Griffin in April 2010. But by then, she and Bill Griffin were no longer together: She had filed for divorce in early 2008. Three years later, she died.</p><p>In October 2010, Judge Roberts ruled for the bank and ordered Griffin to repay $4.9 million with interest and fees.</p><p>Griffin is not the only borrower Bank of Commerce has gone after recently. Not long ago, it won a nearly $7.1 million foreclosure judgment against Coastal Island Group LLC, a local firm comprising Daniel Ball, Guy W. Peterson and W. Howard Rooks, records show.</p><p>Lots that secured the loan are to be sold at auction by the Sarasota County Clerk of Court on Sept. 4.</p><p>Though the scraps between the once-effusive lender and the once-prolific investor offer a rare public show of business brutality, some are not surprised to see Griffin attached to the imbroglio.</p><p>Many consider Griffin to be among the most notorious figures in Florida insurance history.</p><p>After successfully launching workers' compensation firm Riscorp Inc. and guiding it through years of phenomenal growth, Griffin in 1996 took the company public through a stock sale and pocketed more than $60 million in bonuses in the process.</p><p>But the company's fortunes turned less than a year later, when Riscorp became the second-largest insurance concern to collapse in state history.</p><p>In the wake of the corporate implosion, five Riscorp officers — including Griffin — were indicted for allegedly funneling more than $360,000 in illegal campaign contributions to politicians, including Sarasota's Katherine Harris, then a state senator. Harris paid back $20,000 that her state senate campaign had received.</p><p>Griffin, who was reportedly worth $500 million at the time, pleaded guilty to a felony charge of conspiracy and served a five-month sentence in a Panhandle prison camp.</p><p>In the years since, Griffin's business acumen appears to have lost some of the sparkle that initially made Riscorp seem a wunderkind, according to court records.</p><p>Wells Fargo Bank won an $11.1 million foreclosure judgment against him tied to buildings he controlled in Southside Village, including the Morton's Plaza complex on Osprey Avenue.</p><p>Aurora Loan Services obtained a $2.7 million judgment over a loan secured by 4312 Higel Ave., on Siesta Key.</p><p>U.S. Bank won a $2.5 million foreclosure on a condo at The Beach Residences, on Lido Key.</p><p>In filings in Bank of Commerce's lawsuit, the lender claims Griffin has converted a number of his corporate entities into limited liability companies and given his children partial ownership to shield them from the bank. </p><p>The banks also contends Griffin sold a Lakewood Ranch office building for $2.15 million and deposited most of the sales proceeds in a secret Cayman Islands bank account to prevent the bank from seizing it.</p><p>The bank also has laid claim to $539,000 Griffin received from Greenstreet Inc., a successor entity to Riscorp. The money was recorded as a loan, but the bank maintains it was instead a capital distribution that should be available for recovery.</p><p>Griffin used that money to “fund his lavish lifestyle, paying his personal American Express bills, his housekeeper, his cable bills and an assortment of other, non-business expenses,” the bank said in court documents.</p><p>Kimberly Bald, Griffin's attorney, has yet to file responses in court to the bank's requests for a receiver to take control of his business assets, or to the motion for contempt, records show.</p><p>If the adage that one has to “spend money to make money is true,” it could apply to Bank of Commerce collections, as well.</p><p>Murphy said he does not know how much money the bank has spent trying to collect from Griffin. But in April, he told shareholders the bank's attorneys are “diligently pursuing borrowers to recoup money.”</p><p>Murphy said that those professional fees have affected bank profits.</p><p>The bank has lost $229,000 through the first half of 2013.</p><p>Murphy maintains the cost has not only been kept low, but that it will work out to a fraction of the collection overall.</p><p>“I have a responsibility to value that cost versus what I would think to be the end recovery,” Murphy said.</p><p>“The last downturn caused a lot of people to have problems that we ended up having to pursue through foreclosure and litigation,” he said.</p><p>Unwittingly, perhaps, Griffin has caused the bank to rack up larger fees than it might have, after the bank was forced to switch lawyers earlier this year.</p><p>Sarasota attorney Thomas Dart had been handling the case for the bank. But when his firm, Adams and Reese, merged in March with a Jacksonville law firm that had represented Griffin and related companies six years earlier, then-Circuit Judge Rick DeFuria ruled that a conflict of interest existed.</p><p>Adams and Reese could no longer represent the bank in the case, leading the bank to hire Chase, an attorney with Shumaker, Loop & Kendrick.</p><p>But Griffin also had to change attorneys last fall, when Harry Haskins and Thomas Avrutis stepped away after both were subpoenaed by the bank to explain their payments from Griffin. That created “a conflict and irreconcilable differences,” they said.</p><p>Neither Chase nor Murphy would comment on how much of Griffin's debt has been recovered to date.</p><p>Given the animosity, there is little surprise that there are no ongoing talks to settle, Chase said.</p><p>“I've always welcomed business solutions to business problems,” the attorney said. “There are no current discussions to settle, but that doesn't preclude discussions from occurring in the future.”</p>